Indian entrepreneurs and investors are coming to the conclusion of a year that included everything: record valuations, massive investment rounds, the birth of over 40 unicorns, and public listings in both directions.
Experts reflect back on 2021 and offer predictions for the new year in the latest edition of Moneycontrol Masterclass. Sanjeev Bikhchandani, A91 Partners general partner Abhay Pandey, Edelweiss Asset Management chief executive officer Radhika Gupta, and Souvik Sengupta, creator of Infra.Market.
“The initial public offering (IPO) of food delivery software Zomato was a watershed moment for startups. It demonstrated that businesses founded in the last decade have the potential to go public in India,” Sengupta said, adding that the number of companies that go public is more essential to the ecosystem than the number of unicorns born (startups having a valuation of at least a billion dollars).
Apart from Zomato, Nykaa, a cosmetics-to-fashion store, and others climbed to new highs in their initial public offerings, outperforming rivals and predicted multiples by a wide margin. However, Paytm, a digital payments startup, and others saw their stock prices plummet after the IPO.
“New-age businesses are being accepted more readily…
But, in my opinion, private market valuations cannot be completely separated from public market valuations. While investment may continue, whether valuations will remain the same in six to nine months remains a question mark if a majority of these IPOs remain underwater, according to Bikhchandani.
Venture capitalists (VCs) had a mixed year in 2021, with their portfolio businesses increasing in value but struggling to enter into new transactions, as well as facing rejection and more competition than ever before.
“For VCs like us, it’s been a frustrating year. Although we’re all doing a lot better today,” Pandey admitted, adding that the fundraising boom will continue into 2022, but it’s anyone’s estimate whether it will surpass this year’s $30 billion or fall short. “It will undoubtedly be greater than what we seen prior to 2021.” “Some money would go from China to India,” he predicted.
Despite record demand for startup IPOs from retail investors, it is uncertain if companies can rely on them on a continuing basis.
“There was a lot of favourable feeling around IPOs earlier this year when you had a couple successful listings. Then you had a couple of difficult listings, and the mood immediately changed. At best, retail sentiment is highly volatile and driven by momentum. “What we’ve seen in the past is that retail investors haven’t made a lot of money in IPOs,” Gupta added.
Sengupta believes that business-to-business (B2B) companies like Infra.Market would experience substantial demand when they go public, despite the fact that these companies are less well-known and valued. “Most B2B (business to business) businesses have stronger unit economics than B2C (business to consumer) businesses. Because of their scale, some B2B enterprises will give their listed counterparts a run for their money,” he said.
Guests also revealed their most apprehensions and wishes for the year 2022. “The greatest hope for 2022 is that the listed market diversifies away from old-age enterprises and industries and is finally represented by the new economy,” Gupta added.